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Why Seasonal Adjustment Sucks

January 15, 2012 – This is a tiny selection of some of my past comments on why I love Seasonally Adjusted data. This is by no means a complete compendium, but a mere sampling of my odes to the odious seasonal fudging, finagling, falsifying, manipulating, or whatever you want to call it, process.

Why do conomists and paid Wall Street pundits use only SA data? I guess because they are too lazy, because most government agencies who put this data out do provide it. Or maybe they want to manipulate us into doing the wrong thing. Or maybe they figure we’re too dumb to understand it.

Well, we’re not too dumb. In fact, looking at the long term downtrend in the consumer sentiment charts, it’s clear that the average “consumer,” otherwise known as a “person” except to conomists and pundits, is far smarter than the average conomist. Conomists typically get forecasts right less than half the time, probably worse than random chance. Today they guessed wrong on all 3 big reports, the Michigan sentiment index, the NY Fed Empire State Index, and Industrial Production, which shows how much they know.

By the way, when will the Wall Street media do a report on what frauds most of these conomist shills are? I think you know the answer.

Meanwhile, the long term downtrend in “consumer” sentiment shows that over the long haul “consumers” get it right most of the time. After all, we “consumers” must live in the real world. Conomists, richly paid by their Wall Street handlers, live in ivory towers, never having to be concerned with the every day trials and tribulations which the rest of us know as “reality,” not seasonally adjusted.

To understand the real, actual data, which is commonly referred to as “not seasonally adjusted,” instead of the more accurate and descriptive “actual data,” we need only look at a chart of the patterns of that actual data. The real story of what’s actually going on tends to jump off the page. For those who might be “pattern-recognition challenged,” I’m happy to describe what the patterns are showing. Because if we don’t have a clear and accurate picture of the reality of the present and past, then there’s no hope of getting the future right. First, we must know where we are.

Seasonally adjusted numbers frequently veer away from reality by the very nature of the arbitrary seasonal adjustment process. Conomists and the media focus almost entirely on this nonsense, which attempts to compare one fictitious number with another fictitious number to derive a fictitious month to month change. Meanwhile they ignore the actual data. I mean, if you’re going to emphasize the seasonally adjusted crap, you could at least check it against the trend of the real data.

The not seasonally adjusted (NSA) data is the actual data. The seasonally adjusted data is absolute fiction, and it frequently over or understates the real rate of change of the trend, and sometimes even goes in the opposite direction of the actual momentum of the trend. The conomic establishment tries to downplay the actual data by calling it “not” data as in “not seasonally adjusted,” which carries the connotation that somehow “seasonally adjusted” (SA) without the “not” in front of it is the real thing, when the opposite is true.

Mainstream Wall Street and academic shill conomists cloud and obfuscate the facts by sticking them into a numbers grinder hoping the product will come out as a nice tasting numbers sausage that everyone can eat. Unfortunately, sausage, while tasty, isn’t good for you when it’s your entire diet. And if you actually knew what you were eating, you wouldn’t eat it.

Wall Street and academic conomists are too lazy or too crooked to do the simple analysis of comparing year to year changes and the monthly rate of change in the real data to past years to get a clear picture of where the trend is headed. It’s so easy to do when the data is placed on a chart. But unlike technical analysts who actually know how to read patterns and trends in noisy data, the vast majority of shillcademic and Wall Street conomists who sell their souls just to get on TV, have no clue how to to do that. The process is so simple. Maybe that’s the problem. They like complication because they think it puts the truth out of reach of the general public. In reality, the public gets it. It’s the conomists that don’t.

The following chart is a picture of reality versus the the Impressionist art of seasonal adjustments. Sometimes it represents reality to some degree, and sometimes it doesn’t. If you are following that data, at any given time you have no way of knowing which it is. One thing is certain–photo-realism it ain’t. There are ways to measure trends using actual data. One way is shown on this chart, which is to show the year to year line as of the current and corresponding date. Another is to view the annual rate of change as shown in the first chart above.

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